Scam alert – Stay safe from cryptocurrency scams

Scammers are finding new ways to take advantage of growing public interest in the sale and exchange of cryptocurrency, eg bitcoin.

There are more than 1,300 different cryptocurrencies available on the internet. Many overseas cryptocurrency exchanges are unregulated and operate only online, with no connection to New Zealand. This makes it hard to know who is offering, exchanging, buying or selling cryptocurrency.

It also means recovering your money is unlikely if things go wrong.

Risks to be aware of:

Scammers use old tricks in a new area. Any unexpected contact making an attractive offer could be a scam. Scammers use email to fool people into giving over crypto-exchange login details — just as they do to try and trick bank customers into parting with passwords.

Scammers make promises about cryptocurrency to lure people into Ponzi schemes or pyramid schemes. In these schemes, people pay for cryptocurrency and receive payments which make it seem like their ‘investment’ is growing. The money actually comes from joining fees charged to other people tricked into the scam. Beware of people inviting you to join cryptocurrency groups — your friend, family member, neighbour or co-worker may be caught in a scam without realising it.

Your initial stake is not usually protected. Buying cryptocurrency is speculation — not investment. If you buy cryptocurrency, you are betting on the value of a digital token rising. If the value falls, you may be left with nothing.

There are very few regulatory protections. People who buy cryptocurrency or use cryptocurrency exchanges are likely to have less regulatory protection than those investing in a traditional debt or share offering. Many cryptocurrency exchanges are unregulated and operate only online. It’s difficult to find out who is behind them, or recover your money if something goes wrong.

Buying legitimate cryptocurrency can expose you to scams. Scammers create convincing copies of legitimate trading sites to fool people into entering private information. This is used to take money or cryptocurrency. Always type your exchange site URL into a browser search bar — don’t click on email links or ads.

Websites for buying and trading cryptocurrency can be hacked. While cryptocurrency is secured with encryption technology, this doesn’t guarantee the safety of websites used to buy, trade, and monitor cryptocurrency.

If you’re thinking about making an investment of any kind, take time to do your research. Don’t be rushed into a commitment. Consumer Protection recommends seeking expert financial advice.

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